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Banks cut interest-free credit card term lengths: where to find the best deal

Joanna Faith
Written By:
Joanna Faith

Banks have been slashing the terms of their longest balance transfer deals over the past two years, research has shown.

While demand for 0% balance transfer credit cards shows no sign of slowing down, interest-free term durations have shrunk by up to a third since early 2017.

In February 2017, 10 major credit card brands offered borrowers 0% interest deals lasting 40 months or more.

This meant you could borrow money on a card and not have to pay interest for at least three years.

But today, the longest interest-free deal from those 10 firms stands at just 33 months, according to analysis by Andrew Hagger of website Moneycomms.

If this trend continues, borrowers may find it hard to secure a 30-month term come January, he warned.

Shifting credit card debt to an interest-free deal can be a good way to save money because borrowers’ monthly repayments go towards their balance, rather than the interest charges.

Only 55.1% of the £67.8bn of outstanding credit card balances are being charged interest, which means around £30.4bn is on interest free deals, according to data from UK Finance.

With 0% term lengths decreasing, borrowers will find themselves paying interest earlier than they’d like, with some providers charging interest of more than 20%.

“Some people will be using 0% as a smart way to save money, however for others it is simply a life jacket to help them to continue to tread water as they struggle to manage increasing levels of personal debt,” said Hagger.

“The problem is nobody knows how much of the £30bn relates to those under financial pressure. Increasingly, this will be an issue for these customers if long term 0% credit is suddenly no longer an option and they are faced with having to pay 20% APR or more on their borrowing.”

Where to find the best deal

MBNA, Halifax and Lloyds Bank have been responsible for the most severe 0% cuts. Despite this, MBNA still offers the longest deal at 33 months – although this comes with a 1.99% balance transfer fee.

The longest fee-free deal on the market is 30 months from Santander.